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Americans Financial Unpreparedness for Living Longer than Expected

  • Published: 2011-01-05 (Revised/Updated 2016-04-15) : Author: Society of Actuaries
  • Synopsis: Nearly Half of Americans Ages 45 to 70 Have No Plans to Protect Themselves Against Outliving Assets or the Rising Cost of Healthcare in Later Life.

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"While living past one's expected age can mean more time with family and friends, it can also pose potential financial, physical and societal risks"

Nearly Half of Americans Ages 45-70 Have No Plans to Protect Themselves Against Outliving Assets or the Rising Cost of Healthcare in Later Life - A New Society of Actuaries (SOA) Survey Uncovers Americans' Financial Unpreparedness for Living Longer than Expected.

Nearly half (48 percent) of Americans ages 45-70 have no financial plans in place to protect themselves against outliving their assets and the rising cost of healthcare should they live longer than they expected, according to a new survey released today by the Society of Actuaries (SOA).

Additional findings show more than one-third are worried about running out of money during retirement, but only 20 percent plan to purchase an annuity or other form of guaranteed lifetime income to protect their assets.

"It's apparent that Americans, specifically the baby boomer generation - many of whom will be eligible for retirement the beginning of the new year - have not saved enough money for retirement," says Anna Rappaport, FSA, MAAA and president of Anna Rappaport Consulting.

"With the challenges in the housing and financial markets over the past few years, coupled with the fact that people are living longer, many baby boomers are finding themselves unprepared to maintain their lifestyle in retirement. As actuaries, we cannot stress enough the importance of having a plan in place that addresses all of the risks individuals may face in retirement, such as spending available assets too soon, meeting financial care needs, paying for the rising cost of healthcare and adjusting financially and otherwise to the loss of a spouse."

The survey also found that nearly three quarters (71 percent) of respondents plan to claim Social Security before the age of 70. However, actuaries like Anna Rappaport emphasize the importance of claiming Social Security as late in life as possible to help secure more guaranteed lifetime income in retirement and help hedge against the risk of outliving assets.

Looking at other actions Americans take to protect themselves and hedge against potential future risks, the SOA survey found that 75 percent of Americans ages 45-70 protect their tangible assets, such as housing, through home or renter's insurance; however, only 19 percent plan to insure the extra costs of disability and well-being by purchasing long-term care insurance.

"While long-term care insurance may be a complex and somewhat costly product, it can act as a financial safety net should people need extensive care in their old age," says Dawn Helwig, FSA, MAAA and consulting actuary for Milliman, Inc. "Purchasing a long-term care policy or combination product can help mitigate the potential risk of having to pay out-of-pocket for unexpected health-related costs down the road."

At the SOA's 2011 Living to 100 Symposium, taking place in Orlando from Jan. 5 - 7, actuaries, demographers, gerontologists, biologists and researchers from around the world will gather to discuss some of the topics addressed in the survey, as well as share ideas and knowledge on aging, changes in survival rates, challenges of surviving to very high ages and the impact of long life on business and society.

"While living past one's expected age can mean more time with family and friends, it can also pose potential financial, physical and societal risks," says Timothy Harris, FSA, MAAA, symposium co-chair and principal at Milliman. "At this year's Living to 100 Symposium, experts will present more than thirty papers, which address these issues, and will work together to find some potential solutions to help people mitigate and prepare for those future unforeseen risks."

The SOA's survey findings were based upon a nationally representative online survey of 1,006 individuals, ages 45-70, and had an error rate of plus or minus 3.10 percentage points.

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